Finance study reveals UK SMEs outperform Q2 expectations despite drop in revenue

UK SMEs outperform Q2 expectations, and are cautiously optimistic for Q3 revenue rebound, according to a new study.

Barclaycard Payments’ quarterly SME Barometer reveals small and medium businesses have exceeded their revenue predictions for Q2. At the start of April, SMEs predicted a 28% decline for the quarter, but now that Q2 is in the books, the research reveals the average reported loss of 14% was less severe than predicted.

Highlights

• Optimism has jumped 16 points, showing that businesses are feeling more positive about the future.
• Barclaycard Payments data for the first half of Q3 shows the average daily value of SME transactions is up 60% compared to the daily average for Q2.
• SMEs are preparing for recovery, with four in five planning to invest over the next 12 months – up from two thirds last quarter.

Stronger-than-expected Q2 performance has led to a boost in optimism, with index scores jumping from 79 out of a possible 200 points at the start of Q2, to 95 points at the start of Q3. This is also reflected in business outlook – 36% of SMEs report a positive outlook for their own business this quarter, up from 21% in Q2. Across all sectors, SMEs predict a 5% increase in revenue for Q3 compared to Q2, which grows to 14% over the next 12 months.

Sectors that rely on consumer card payments, such as hospitality and leisure, were hit particularly hard in Q2, and many were not able to re-open safely until the start of Q3.

These sectors appear to be recovering well, however. Barclaycard SME transaction data for the first half of Q3 has shown consistent week-on-week growth, and the average daily transaction value has risen by 60% compared to the daily average for Q2. However, card transactions for the first half of Q3 remain 13% behind the same point last year, indicating card-taking SMEs have a way to go to match their pre-pandemic performance.

Measure	Q3	vs. Q2	vs. Q1
Business sales pipeline	103 (+16)	87	-31
Planned investment	89 (+14)	75	-29
Supply chain	121 (+10)	111	-20
Legislation impact	91 (+2)	89	-7
Cash flow strength	113 (+17)	96	-25
Raising finance	100 (+19)	81	-36
UK economy prospects	70 (+22)	52	-48
Sector prospects	94 (+23)	71	-36
Business prospects	108 (+25)	83	-34
Business stability	64 (+17)	47	-45
NATIONAL AVERAGE	95 (+16)	79	-31

Micro businesses are defined as any business with a turnover of under £2m. Small businesses are those between £2m-£10m. Medium-sized businesses are £10m-£25m.

The percentage of SMEs reporting coronavirus negatively impacted their business has dropped this quarter, falling from 82 % in Q2 to 74% this quarter.

While the pandemic continues to cause disruptions, with 60% of SMEs expecting it to have a significant impact until at least the end of September, the future looks more positive – that number drops to just 13% by this time next year.

SMEs are also proactive in their own recovery – 80% plan to invest over the next 12 months, with new equipment and technology (32%) and marketing (28%) the greatest focus.

The return to ‘normal’ for SME employees

The biggest change SMEs have implemented to mitigate the effects of coronavirus is reducing staff numbers (26%), which rises to 47% amongst medium businesses.

The top benefit of coronavirus reported by SMEs was also related to staffing – with a third (33%) welcoming the opportunity to improve remote working capabilities.

Many SMEs can see life returning to how it was before coronavirus, with 42% expecting a return to ‘normal’ at some point, and a further 31% saying that the reason they won’t return to normal is because they have made small changes and improvements that they intend to keep.

Similarly, many SMEs have already started to return to their offices, with 21% reporting that employees worked on the premises throughout lockdown, while 22% began encouraging a safe return to work when easing began in July. Just over one in ten have revealed they will be moving to a permanent working-from-home model and not asking employees to return to the office.

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